JPMorgan says this S&P 500 sector "offers a rare combination of durable growth"

JPMorgan turned constructive on the S&P 500 healthcare sector, saying it offers an unusual mix of durable growth, strong profitability, reasonable valuation and diversification at a time when investors are crowded into AI-related trades. The note argues healthcare has been heavily neglected after years of underperformance versus the S&P 500, multiple 10%+ drawdowns, and a sharp drop in index weight from about 16% to 9%. JPMorgan says sentiment has been pressured by drug-pricing reform, reimbursement issues, Medicaid cuts and policy uncertainty, and that the sector has become a common funding source for short positions against AI longs. The bank sees valuations still favorable and expects earnings growth to accelerate in 2027, suggesting a more durable inflection point may be near. The call is broadly positive for healthcare equities and implies potential sector rotation away from expensive AI-heavy exposures if policy risks ease or AI productivity gains surprise to the upside.